China Adopts "New" GDP-Boosting Accounting System

China's GDP is about to undergo the same magic that US GDP received earlier in the year. The "Chinese system of National Accounts" will see five significant adjustments that are expected to (surprise) boost the size of the nation's estimate of its GDP. The National Bureau of Statistics is considering making the changes to reflect the latest economic and social developments and implement the reform guidelines unveiled at the 3rd Plenum recently. From the addition of research and development - intellectual properrty - (just as the US did) to including mark-to-market changes (read rises) in employee stock options and real estate in consumption data, the Chinese appear dead set on making a once-unbelievably goal-seeked number into an entirely fantastical representation of reality (which of course enables moar higher manipulation as to avoid any debt-to-gdp hurdles that the real world might see as a concern).

The nation plans to give GDP readings and the revised historical figures of this indicator under new calculation method after the end of this year...

the U.S. revised its GDP data, the most important amendments is to research and development expenditures as well as entertainment, literary and artistic originals such as fixed capital formation expenditure included in GDP. This great repercussions in the international arena, in China also attracted relatively widespread concern, there has been speculation heated debate whether China's national accounting system to do the appropriate amendments?

New accounting system will likely increase in total GDP:

The plan includes 5 key sections that change how the nation's balance sheet and income (consumption) is calculated...

1. the introduction of the concept of intellectual property products, research and development expenditures will be included in GDP

2. the introduction of "economic ownership" concept, so that more reflect the actual accounting results

3. the rapid development of the real estate market, housing prices and rents are rising

4. land contract management rights transfer income to become an important part of farmers' income

1. Research and development expenditure will be included in GDP - based on best guesses, historical and current R&D will be "priced" into GDP data leaving plenty of scope for a goal-seeked guess at what the number needs to be.

2. Accounting of actual final consumption - this means that government-provided services - that improve people's living standards - will be 'valued' and added to consumption data. This includes education, health, social security and other spending data. Furthermore, the mark-to-market gains from employee stock options will be included in final consumption data (so even more need to keep that stock market high for the PBOC)...

3. Gains (losses) from housing - the GDP data will include some adjustment based on the mark-to-market of home prices as a consumption-based positive. In other words, as the bubble grows, the rise in house/real estate prices will be included in GDP consumption calculations

In other words, China will be adding to its base GDP data all the bubble-driven aspects of the economy as the bubble continues to grow... one can only imagine what that will do to a) volatility, and b) the downswing when these 'adjustments' are forced the 'wrong' way...

On the bright side, this plan is not expected to be fully implemented until 2015 - and who knows what this will all look like by then...

China is to the 21st century what Germany was to the 20th century and the elite in the U.S. and China would like nothing better than a world that works for Chinese wages. It has been this way since 1971.

When the numbers aren't good enough to accomplish whatever it is they're trying to accomplish (e.g. paint the tape; e.g. put lipstick on pigs, etc.), change the methodology/formula is such a way that makes it easier to accomplish.

It's for the sheeple. Sheeple demand rules to follow, to obey. It's their nature or their flock (swarm) will become a riot. It's OK if the rule are lies, fake or change frequently, as long as their are rules to be obeyed.

When the old laws/rules don't allow you to keep stealing (transfering wealth to the top 1%), simply change the rules or methodology use to "report" things like GDP and inflation to the sheep. This should kill whatever remaining commodity producers there were in China. Bullish for American farmers and monsanto...

Correct, this has been the case since 1971. The Chinese are masters of propaganda and central planning, they have a long history with fiat currency and the genocide that must be accomplished to keep the state and fiat in power.

Yes, have a good look at any inflation related chart since then and prepare for the vertical blow off and a total hockey stick to the moon shoot.

In the meantime, back on Earth. People need to eat and debt paper doesn't feed people. How much longer you think before .gov has to take over and RUN Big Ag because nobody wants to carry the privately held risk to feed millions and get paid in paper?

Farmers are shutting down as a direct result of Fed policies. I've seen what happens when .gov runs businesses or worse yet, farms.

Central planning never works and millions will starve to death in China as well as Europe and North America. The walls of their houses plastered with worthless stock certs for wallpaper.

"...enables moar higher manipulation as to avoid any debt-to-gdp hurdles that the real world might see as a concern)."

Nothing occurs in a vacuum. 1+1 still ALWAYS =2. Enron hid bad debts in shell companies and it still didn't matter as 1+1 ALWAYS = 2.

This GDP manipulation gimmick will not work. it will just hide something for a while until the math catches up with it. The real world came to see through Enron's gimmick and i for one already see through the GDP gimmick. It is just a phony number. Imagine having a recession with a positive GDP. They might as well say the GDP was 10 last quarter, instead of 2.8. Higher is better, so just make up a higher number. That way we can pretend U.S. GDP is higher than any other country. Just ignore the 48 million people on food stamps.

well...our own fucked up government did it first. Why shouldn't all the other fucked up governments follow suit and do it too? It's all skittles and unicorns and pixie dust now anyways. If all central banks are in a currency war, printing as fast as they can to the bottom, then why not all governments get in a revised GDP war and make their numbers say anything they want them to? It only fits the full-retard actions we've been living through (barely) for the last many years.

PBOC doesn't want (yet) to go batshit insane with fiat printing, for now. Actually it is still reeling from the printing hangover of 2009. Compared with GDP, the PB worries much more about excessive inflation.

For this to work, the PB must dispose of its massive USD portfolio that must be matched dollar-for-dollar by domestic CNY as long as it stays in China. To do this, it may either invest it abroad, or pay it for imports. Gold, in this regard, is more of an import than an investment. As long as the PB buys and holds gold with USD fiat, it has one less thing to worry about the liquidity glut.

1. the introduction of the concept of intellectual property products, research and development expenditures will be included in GDP

How do you put a value on IP that you stole from someone else? Do you get to account for the man hours to reverse engineer their technology? Do you get to value IP based on their sales forecast or the market potential that you hope to steal?